2006 (3) TMI 425 - AT - Central Excise

Summary

Issues: Demand of duty and cess, imposition of penalty, waiver of pre-deposit, inclusion of optional warranty charges in assessable value.

Analysis:
1. Demand of Duty and Cess: The judgment pertains to a case where the appellants were demanded Rs. 68,68,433/- towards duty and cess on cars cleared to dealers during a specific period. Additionally, a penalty of Rs. 15.00 lakhs was imposed. The application sought waiver of pre-deposit and stay of recovery for these amounts. The Tribunal considered the previous case of the same assessee and directed a pre-deposit in that case, taking into account financial hardships. Despite the pre-deposit, the appeal was pending, leading to no fault of any party involved.

2. Inclusion of Optional Warranty Charges: The main contention in the present case revolved around the inclusion of "optional warranty charges" in the assessable value of cars manufactured and cleared to customers through dealers. The appellants argued that optional warranty was not a condition of sale and should not be included in the assessable value. The Revenue, however, argued that assessable value should consider the terms of the transaction, including optional warranty charges if the buyer opts for such warranty. The Tribunal referred to a previous case involving Volvo India and emphasized the need to examine the agreement between the manufacturer and buyers to determine the includibility of optional warranty charges. Since only 20% of buyers opted for the warranty during the disputed period, the decision on includibility depended on the specific transaction terms.

3. Pre-Deposit and Stay of Recovery: The Tribunal directed the appellants to pre-deposit Rs. 20.00 lakhs (approximately 35% of the total demand) within six weeks. This decision was based on similar considerations as a previous stay order. The appeal was scheduled to be heard along with another case on an early date, subject to the pre-deposit compliance by the appellants. The hearing was set for a specific date to expedite the resolution of the case given the high stakes involved.

In conclusion, the judgment addressed the demand of duty and cess, penalty imposition, the inclusion of optional warranty charges in the assessable value, and the decision regarding pre-deposit and stay of recovery. The Tribunal emphasized the need to examine the specific transaction terms to determine the includibility of optional warranty charges and directed the appellants to pre-deposit a specific amount to expedite the appeal process.